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Reverse herding behavior in the Malaysian stock market: a wavelet multiple cross-correlation analysis

Author

Listed:
  • Yusri Yahya

    (Universiti Kebangsaan Malaysia)

  • Abdul Hafizh Mohd Azam

    (Universiti Kebangsaan Malaysia)

  • Zulkefly Abdul Karim

    (Universiti Kebangsaan Malaysia)

  • Mohd Azlan Shah Zaidi

    (Universiti Kebangsaan Malaysia)

Abstract

This study uses wavelet multiple cross correlations (WMCC) analysis to identify the reverse herding behaviour in equities market using a dataset from October 2009 to September 2023. WMCC is an enhances traditional cross-correlation analysis by integrating wavelet transform methods, enabling the simultaneous examination of interdependencies between multiple time series across various time scales. The empirical result shows that local retail investors lead other investors stock trading followed by local institutional in term of trading volume. This pattern occurs for both buy and sell activities thus supporting the existence of reverse herding in Malaysian stock market. Policymakers should explore implementing or enhancing mechanisms such as circuit breakers to address the potential rise in market volatility caused by retail investor sentiment and trading behaviours.

Suggested Citation

  • Yusri Yahya & Abdul Hafizh Mohd Azam & Zulkefly Abdul Karim & Mohd Azlan Shah Zaidi, 2025. "Reverse herding behavior in the Malaysian stock market: a wavelet multiple cross-correlation analysis," Economics Bulletin, AccessEcon, vol. 45(4), pages 2102-2110.
    • Handle: RePEc:ebl:ecbull:eb-25-00052
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    References listed on IDEAS

    as
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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • G1 - Financial Economics - - General Financial Markets

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